To budget is usually attributed to spending restrictedly. But, restricting too much with what to spend doesn’t always help because there are inevitable expenses to consider from food, water, travel, electricity, and other bills. The best approach is to observe budget management wherein you spend money in the right control and benefit your financial goals. And how can you manage that? Use well-made budget plans!
A budget plan is a detailed financial statement that summarizes your expenses, income, and other finances in a certain period. More so, the plan helps you estimate, compare, and track your daily, weekly, monthly, or annual expenses. Hence, this is your official document worth using when you need to spend your money for whatever purpose wisely.
Senator Elizabeth Warren’s book explained the popular 50-30-20 budget rule wherein you spend 50% for your needs, 30% for your wants, and 20% for savings.
According to Investopedia, Elizabeth Warren’s known 50-30-20 budget rule is one of the most effective budgeting tips. But what exactly are they? Learn about the principal financial tip further in this section.
You already know what the budget plan and the 50-30-20 rule are. But it is important to apply your knowledge in realtime by finally learning how to make the budget plan itself. In fact, budget planning is achievable when you follow these easy steps:
Every person has his or her budgeting goal. Hence, a budget plan is not one-dimensional. And the key is to conduct a financial analysis first to determine your specific needs and goals in financing. Maybe you are budgeting for an event, business proposal, marketing plan, or just a personal financial plan. Focus on your goals so you’ll know how to form your budget plan.
You would need access to your income and expense statements to know what information is needed to present in the budget plan. You will eventually calculate your income and list all your expenses. And what expenses to cover depends if you are planning a daily, weekly, monthly, or yearly budget plan.
Expenses are usually divided into two. The first one refers to the historical expenses, meaning you indicate how much money was already spent or used. Meanwhile, the second category refers to your estimated expenses, meaning you write down your estimates for specific expenses that did not happen yet. And make sure to use the right solutions in calculating all your expenses.
Just like any expense sheet, you shouldn’t make your budget plan too complex to understand. Otherwise, you might have a hard time depending on that plan as your reference. Be sure you understand the words, statements, calculations, and labels in the document. And finalize if you want the plan to be printed or shared through soft copy. Go for the most convenient option for you and stick to your plan.
A budget plan is extremely important so you will have enough money left to spend on your essentials. You won’t need to lose track of your daily expenses anymore. With a budget plan at hand, you can avoid countless debts or worse, bankruptcy.
One example to maintain a smart budget plan is by setting realistic estimations. Maybe you overestimated the generated expenditures instead of really considering the reality. Also, you should know how to adjust to any profit or loss instead of sticking to an inflexible plan. Another tip is by monitoring consistently. You won’t be able to tell if you saved a lot of money or not without regular monitoring anyway.
A monthly budget is your ultimate financial management tool when you consider budget planning for a certain month. Hence, you can record all expenses spent or saved every month.
Life is short and you deserve to enjoy spending for what makes you happy. But spending excessively could make your life shorter when you almost have nothing left to survive. Thankfully, preparing a budget plan can make a huge difference. Always manage your finances carefully so you won’t have to suffer from every encountered expense in life.
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